Eli5: Why are so many office blocks and retail shops in UK that are ” to let” remain empty for months, rather than to reduce rent ? Why do landlords do this?

Question

Eli5: Why are so many office blocks and retail shops in UK that are ” to let” remain empty for months, rather than to reduce rent ? Why do landlords do this?

In: 1189

Answer 1

I’ve seen this in Australia as well and I suspect it has to do with the long length of the leases. Typically a lease will be for up to 20 years. (5 years with with 3 x 5 year options or similar). This means that if the landlord drops the price he can be stuck with low rent for twenty years. The annual rent increases are based on the original rent. Staying empty for a year is still better than dropping the rent any more than 5% over the 20 years.

In tight times you will sometimes see landlords offering incentives up front such as a rent free period or free fit out. After that the rent is at the standard rate for 20 years if the tenant decides to stay that long.